Factors Influencing a Currency Pair Exchange Rate
The exchange rate refers to the value of the US dollar against
the values of currencies of other countries. Such a rate helps
determine how much we pay for imported goods and services and how
much we receive for what we export, among other things. When the
value of the US dollar drops, imports become more expensive, and
we tend to reduce the volume of our imports. Simultaneously,
other countries will pay LESS for some of our products and that
will tend to boost export sales. If imports and exports are a
substantial part of a country's economy, as is the case with
Canada, the exchange rate plays a particularly important role in
our economy. The exchange rate between two countries' currencies
is particularly important if the two countries are heavily
involved in trade.
What factors affect an exchange rate?
A country's exchange rate is typically affected by the supply
and demand for that country's currency in international exchange
markets. This is typically known as a floating exchange rate. If
demand, for say dollars, exceeds supply, then the value of the
dollar will go up. If however, the supply of dollars exceeds
demand, then its value will go down. A huge amount of money is
bought and sold on international exchange markets for many
Several factors influence the supply of, and demand for, a
given country's currency.
If INTEREST rates are HIGHER in, say, the US than in other
countries, then investors WILL choose to invest in the US,
increasing demand for the dollar, provided that the expected rate
of inflation is not higher in the US than among our trading
partners. If INTEREST rates are LOWER in the US than in other
countries, investors will choose NOT to invest in the US,
decreasing demand for the dollar.
If the US INFLATION rate is HIGHER, investors are LESS likely
to prefer the US -even with higher interest rates- because of the
expectation that the value of the dollar will be ERODED by
inflation. If our INFLATION rate is LOWER, investors are MORE
likely to prefer the US, because there will be NO expectation
that the value of the dollar will erode.
Trade balance also has an effect on a country's currency. If
world prices for what a country exports rise in comparison with
the cost of that country's imports, that country will be earning
more for its exports than it pays for its imports. The more
demand there will be for that country's currency, the better the
deal becomes. If investors are confident that the US economy will
be strong, they will be MORE likely to buy American assets,
pushing UP the dollar's value. If investors are not so confident
that the economy will be strong, they will be LESS likely to buy
the country's assets, pushing the dollar's value DOWN.
Joshua Kunken is Chief Currency Analyst for ForeignMarketWatch.com
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Forex Trading Online - 7
Reasons Why You Should!
Forex trading online is a fast way to use your investment
capital to it's fullest. The Forex markets offer distinct
advantages to the small and large traders alike, making
Forex currency trading in many ways preferable to other
markets such as stocks, options or traditional futures.
Q1: When you consider that the foreign exchange market has
become the world's largest financial market, with over $1.5
trillion USD traded daily, where does it go from
here?A1:The FX market is unique, in the UK there is no
central exchange, we trade via the inter bank market.
Money Management, Part
There are some common mistakes I've seen traders make in
the area of money management. First, let's understand what
money management is all about.
FOREX - Where Fortunes
Are Made Everyday
The Foreign Exchange Market - better known as FOREX - is a
world wide market for buying and selling currencies. It
handles a huge volume of transactions 24 hours a day, 5
days a week.
Opportunities Presented by the New Iraqi
Could it be possible that you are staring right into the
most spectacular financial opportunity of the century?
Operation: Iraqi Freedom will undoubtedly be a war marked
in history for loss and tragedy, American victory, and the
rise of a nation with a new democratic government. But
could it also be a war historically remembered for the
financial opportunity it created for the sharp investors
who keenly recognized an ephemeral chance at the right
time?The War on Iraq ended with a nation placed on the
footstool of many new operations.
The Nature of the
Consider the following: As a trader you are in a business.
Your strongest opponent has plenty of capital.
Trading Profitably on
the Foreign Exchange Market
You may be asking yourself "how does one begin to trade
profitably as a currency trader?". First, it is important to
closely monitor foreign equity markets to attempt to
predict or model how their respective currencies will
perform against other currencies, ideally, currencies that
are not very closely related, nor proportional, to the
A Look at Forex Market
The investor in the currency market takes for granted that
a pair of currencies can be bought or sold at a moment's
notice. Once an order is placed with a broker, the trade is
executed within seconds.
Discretionary Trading - Which is Best?
Discretionary Trading. Pure discretionary trading will rely
solely on the traders judgment. For example a
discretionary trader may spot a particular pattern
developing on a chart and decide to enter a trade on that
Trade Exit - How To Cut
Losses And Let Profits Run
Cut your losses short and let your profits run. This is the
essence of your trade exit rules.
The psychological aspect of trading is usually
underestimated by those new to trading. The psychological
problem for most traders is the fear of losing - ironically
it is this fear that causes most traders to lose money in
the long run.
6 Critical Factors For
Success in any profession can be broken down into a number
of critical factors. Trading is no different.
Risk and Stock Trading
Fees: The Two Barriers To Overcome If You Want A Successful
You know the old joke:" How do you make a million in the
stock market? Start with two million?" There is no way
around it, risk and stock market fees are a part of trading
that you can't avoid. But, you can manage your risk.
Reality of Online Forex
Foreign exchange trading is the trading of currencies. Most
currencies can be traded.
An Evaluation of the
A Minister of Finance is morally right to lie about a
forthcoming devaluation and a woman has the right to lie
about her age. This is the common wisdom.
Advantages of Trading
FOREX Over Stocks and Commodities
There are many advantages to Trading FOREX as your main
income generator. Let's start by something that may be
worrying you already.
Why Hedge Foreign
International commerce has rapidly increased as the
internet has provided a new and more transparent
marketplace for individuals and entities alike to conduct
international business and trading activities. Significant
changes in the international economic and political
landscape have led to uncertainty regarding the direction
of foreign exchange rates.
The Major Players in the
Foreign Currency Exchange Market - FOREX
Since the US dollar is the centerpiece of the market, it is
normally considered the 'base' currency for quotes. In the
"Majors", this includes USD/JPY, USD/CHF and USD/CAD.
Options Trading -
Advantages and Disadvantages
What is Options Trading?An option is simply granting
someone the right to buy or sell something in the future.
In the case of Dow index futures options, when someone buys
a Dow call option they are buying the right to purchase
that underlying Dow future at a specific price, known as
the "strike price," at a future point in time, known as the
ISO 4217 in Forex
ISO 4217 is an international standard describing three
letter codes to define the names of currencies established
by the International Organization for Standardization
(ISO).The first two letters of the code are the two letters
of ISO 3166-1 alpha-2 country codes (which are similar to
those used for national top-level domains on the internet)
and the third is usually the initial of the currency
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